Canadian miner Royal Nickel Corp is teaming up with private equity firm Waterton Global Resource Management to buy, develop and operate undervalued nickel assets, the companies said on Wednesday.
The venture will have US$35 million to acquire nickel mines and projects, said the companies, and Waterton will pay US$22.5 million for a 50-percent stake in Royal Nickel’s Dumont nickel project in Québec, which the partnership will own.
“Where you have long-term, patient capital, that’s willing to unlock value, I think there’s lots of opportunities,” said Royal Nickel Chief Executive Mark Selby in an interview.
The venture, which has earmarked US$5 million to advance development at Dumont, is currently eyeing four to 11 targets that are relatively low-cost and do not need major capital to develop, Selby said.
Prices for nickel, used to make stainless steel, have dropped more than 40 percent since the start of 2015, on rising stockpiles and weak Chinese demand.
“They are willing to invest with a much longer-term view of where nickel markets are headed, as opposed to what today’s price is,” Selby said of Waterton. “That will allow us to pursue some other opportunities that, otherwise, wouldn’t be available.”
A feasibility study projects that Dumont will produce 33,000 tonnes annually in its first five years of operations, and 54,000 tonnes per year thereafter, with a mine life of more than 30 years.
Toronto-based Royal Nickel also owns a majority stake in Australia’s Beta Hunt gold mine and a 30-percent stake in Manitoba’s Reed copper mine.
Update: Toronto-based Waterton raised US$725 million for its third mining fund, Waterton Parallel Fund, last June. The fund invests alongside Waterton Global Precious Metals Fund II, which closed at more than US$1 billion in 2014.
(Reporting by Susan Taylor; Editing by Tom Brown)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo of Dumont nickel project activity courtesy of Royal Nickel Corp